Sunday, January 06, 2019

Sunday Morning Links

Diamond, in work with Emmanuel Saez — one of our leading experts on inequality — estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent.

Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it.

What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.
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(W)hen taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent — which is consistent with what AOC said.

- Lana Payne writes about the continued class war being waged by the rich, while Sharmini Peries interviews Cornel West about the need to build a stronger collective movement to fight back. And Lynne Fernandez and Shauna MacKinnon discuss the connection between a "right to the city" movement and social justice generally.

- Jonathon Schuldt and Y. Connie Yuan write that the vast majority of Americans are far more favourable toward fighting climate change than their political leaders, while David Akin notes that same holds true in Canada. David Roberts warns that right-wing blather about "innovation" doesn't reflect any serious attempt to address the climate crisis, particularly where it's aimed primarily at shoveling free money toward polluters. And even as the Sask Party's waste of billions of dollars on CCS technology fits squarely into that category, D.C. Fraser reports that Scott Moe is pushing any emission reduction enforcement whatsoever into 2021 at the earliest.

- Finally, Ellen MacArthur points out the prospect of planning intended to achieve a virtuous circle of responsibly managing resources - in contrast to the current economic model based on short-term profits and disposability.